ASIC v Sydney Investment House Equities Pty Ltd

Supreme Court of NSW|2007-10-09|Before: Hamilton J, Dr David J

CITATION : ASIC v Sydney Investment House Equities Pty Ltd [2007] NSWSC 1189 This decision has been amended. Please see the end of the judgment for a list of the amendments.

DECISION : Fixture vacated and proceedings adjourned.

CATCHWORDS : PROCEDURE [32] - Courts and Judges generally - Adjournment - Doubts cast on mental state of self represented defendant in proceedings under Corporations Act for civil penalties.

CASES CITED : ASIC v Mapstone (2006) 59 ACSR 214 Australian Securities and Investments Commission v Sydney Investment House Equities Pty Ltd [2007] NSWSC 434

Australian Securities and Investments Commission (P) Sydney Investment House Equities Pty Ltd (D1) Sydney Investment House Capital Ltd (D2) Edwin James Goulding (D3) Stephen Geagea (D4) PARTIES : Sydney Investment House Pty Ltd (D5) Sydney Investment House (Newcastle) Pty Ltd (D6) Sydney Investment House (Beaconsfield) Pty Ltd (D7) Melbourne Investment House Pty Ltd (D8) Melbourne Investment House (Hawthorn) Pty Ltd (D9) Melbourne Investment House (Collingwood) Pty Ltd (D10)

A J McInerney & D J Barnett (P) COUNSEL : B J Gillard, Solicitor (D3) J A Loxton (D4)

Kim Turner, Solicitor (P) SOLICITORS : Gillard Consulting Lawyers (D3) Self represented (D4)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2941/06 AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v SYDNEY INVESTMENT HOUSE EQUITIES PTY LTD & ORS JUDGMENT 1 HIS HONOUR: When these proceedings were called on for trial before me last Tuesday, 2 October, Mr Gillard, solicitor, appeared for the third defendant, Edwin James Goulding, who had previously been unrepresented. On that day Mr Goulding was not present in Court. Mr Gillard applied for a vacation of the fixture and adjournment of the proceedings on the basis that Mr Goulding was not capable of appearing and conducting the proceedings on his own behalf or, indeed, attending and giving instructions to a legal representative in Court at that time.

2 The application was initially made on the basis of an affidavit that was virtually devoid of content, in that it contained only bald conclusions. The affidavit was an affidavit of Mr Goulding himself. It annexed a report of Dr David J Evans of 28 September 2007 to the effect that Mr Goulding "is unfit to attend Court pending specialist consultation which is being arranged". It also attached a report of 1 October 2007 of Dr Paul Hotton, a psychiatric resident in emergency at St Vincent's Hospital, stating that Mr Goulding "is unwell to attend Court today until further specialist assessment has been done, which is due on 11 October 2007 in the community. Please could you postpone his Court date."

3 I indicated that I was not prepared to grant any adjournment on statements of this generality. This led to Dr Evans being brought to Court. Dr Evans is not a specialist in psychiatry but is a general practitioner of long experience who conducts his practice in Macquarie Street, Sydney.

4 Dr Evans in his evidence indicated that he had first seen Mr Goulding on 6 September 2007 and his evidence as to that occasion was as follows: "Q He hadn't been a patient of yours then? A No. Frankly, I was very apprehensive of him. He was very agitated and in a situation there with just two people there, I was afraid of him really. In any case, he spoke of his likelihood that he might attack people and, um, I, um, rather urgently obtained a supply of tablets from the local chemist and, um, Zyprexa, it's a motor tranquilliser, in full. It's a tranquilliser and its the trade name of the, the drug name. The generic is Olanzapine. And we talked for quite a long time and after he had taken the drug and he improved somewhat and, um, he told me a little of his past history and he explained to me that he had become poor as a result of his folly or whatever. ……

Q That drug, what symptoms does that deal with? That's a tranquilliser I think you said? A Yes, it's a tranquilliser. It's, um, the, one of the most modern of the group of drugs which have been used since about 19, um, in the 1950s, um, and they are a major tranquilliser and they are particularly effective regarding treatment of schizophrenia and, but also effective regarding agitation and aggression.

Q Do they operate chemically on the body or on the brain? What effects do they have? A They have effects on the brain and people are more rational and they are less affected by circumstance, circumstances. So in my experience people think more clearly and are less liable to error if they have taken that sort of medication."

5 Dr Evans saw the third defendant again on 12 September 2007, at which time he was calmer. He saw him again on 28 September 2007 and on this occasion it appeared that the third defendant had ceased to take his medication for a couple of days and had again been agitated and perhaps violent. An AVO was mentioned. Dr Evans again saw Mr Goulding on the morning of 2 October 2007, the day on which the trial was to commence. His evidence concerning his observations of Mr Goulding on that day are as follows: "On the basis of today's, um, assessment he's much better today and quite lucid and pleasant and so on. And, um, I do hope he keeps taking it …"

6 Dr Evans stated that his opinion was that the basic diagnosis is schizophrenia. 7 Dr Evans was cross examined by Mr A J McInerney, leading counsel for the plaintiff, about Mr Goulding's presentation on 2 October 2007. Dr Evans said: "Q So is your assessment of him as of today that as to his physical wellbeing he appears well to you, is that correct? A Yes, reasonably well.

Q Earlier in your evidence in answers to Mr Gillard, with respect to today's consultation, you indicated he appeared much better today, correct? A Yes.

Q He appeared lucid to you? A Yes.

Q He was able to engage in conversation with you? A Yes, today.

Q He understood questions that you asked of him? A Yes.

Q And is it your assessment of his mental state today that he could attend court? A Yes.

Q And in your - A But I wrote the letter on the 28th. The circumstances were different.

Q In your professional opinion he would be able to understand what would occur during the course of the court proceedings today if he were to attend? A Yes, but I would prefer that he sees a psychiatrist first. He's significantly mentally ill and having treatment and I would prefer that he sees a psychiatrist before I could agree with confidence that he's fit for anything.

Q The basis for that view is his presentation to you exhibiting symptoms of agitation and aggression, is that correct? A Yes, he was very bad before.

Q For which you have treated Mr Goulding with Zyprexa and is it your view so long as he continues with the treatment of Zyprexa as to his mental condition he will remain lucid and alert? A Yes, probably, yes.

Q And as long as he continues with his taking his medications of Zyprexa he would be able to, in your opinion, participate in the court proceedings before this court, is that your view? A Probably. I'm not utterly confident because of the likelihood of aggravation by circumstances, it being so recent that he was in an aggravated state, I'm not utterly confident that he would be all right."

8 There was also tendered in support of the application an expert report of Dr Paul Hotton dated 1 October 2007. Although this was not long, it was more ample than the report of Dr Hotton to which I have referred earlier. The substance of that report of Dr Hotton is as follows: "EDWIN GOULDING presented to the Emergency Department at ST VINCENT'S HOSPITAL on the 1 OCT 2007 at 16:52. The presenting problem was REQUESTING TO SPEAK TO A PSYCHIATRIS. [sic]

I review [sic] Edwin in Emergency today. He presented with a years [sic] history of my [sic] psychological stresses which you are aware of. Tomorrow he is due for hios [sic] court appearance. Although he has given me a letter that you have given him and have explained to him that he does not need to attend and needs to give the court this letter [sic].

He has some paranoid beliefs and thoughts of violence towards others, regarding his financial situation. He believes people are following him and that the court and people are against him. He had no suidical [sic] thoughts and deny [sic] acting on thought of harm to other [sic]. He had no positive symptoms of psychosis.

I understand he is on Olanzapine 10mg nocte [sic] and due to see Dr Roberts on 11th October."

9 Dr Evans has arranged for Mr Goulding to have a more ample psychiatric assessment by Dr Sam Roberts on 11 October 2007. 10 Mr McInerney submitted that no ground for a vacation of the fixture was made out. He relied particularly on the account given by Dr Evans of his consultation with Mr Goulding on the morning of 2 October 2007 and, in particular, Dr Evans' statements that on that day he appeared lucid and that in Dr Evans' assessment he could attend Court.

11 However, one must bear in mind Dr Evans' diagnosis, to which he adhered, that there was an underlying condition of schizophrenia and his answer, on being pressed about Mr Goulding's ability to participate in Court proceedings, that he was not utterly confident of it because of the likelihood of aggravation by circumstances: "it being so recent that he was in an aggravated state, I am not utterly confident that he would be all right".

12 Dr Hotton does not make a diagnosis of schizophrenia. His diagnosis is depression with anxiety. He found no positive symptoms of psychosis; he found some paranoid beliefs and thoughts of violence towards others regarding his financial situation. The paranoid beliefs include that people are following him and that people are against him, including the Court.

13 Mr Gillard, the third defendant's solicitor, was in a difficult situation vis-a-vis his client as a result of these medical opinions. He conducted the third defendant's case for vacation of the fixture with firmness but circumspection. The case as conducted was not that there was any clear or firm diagnosis of the third defendant's mental condition, but that there were doubts cast upon his mental state and his ability to conduct the litigation by the medical material that it had been possible to gather in the time available. Equally uncertain were the questions of whether or not with an appropriate regime of medication his condition would be stabilised, so as to make him fit to deal with the litigation, and the likelihood of his adhering to that regime of medication, so as to ensure the necessary stabilisation.

14 I bore in mind that the trial was fixed for the best part of a fortnight. Essentially, I accepted that sufficient doubt was cast over the third defendant's mental state for there to be grave doubts as to whether he was capable of conducting the proceedings. I formed the view that the proceedings against him should not proceed in any form which required his presence in Court.

15 The matter has come back before me on a number of days since then in an attempt to see whether further useful material could be obtained as to the third defendant's mental condition. That that was not forthcoming is not surprising in the circumstances. On the occasions that the matter has been back in Court, there has been discussion as to the form which the adjournment should take as to the conditions or terms on which it should be granted and additional relief which should be put in place. The question has also been considered as to what should occur in relation to the proceedings so far as they affect the fourth defendant, for whom Mr Loxton of counsel now appears.

16 At an early stage I considered that the proceedings might be able to go ahead to use the time set aside for the present fixture to hear the plaintiff's opening and to have the plaintiff's considerable written case read, reserving to Mr Goulding the right to take objections to the evidentiary material and to cross examine the witnesses as desired at a later time. However, it soon appeared to me that that was not a way of proceeding that was fair to Mr Goulding in light of the seriousness of this case. That meant that the fixture needed to be cancelled and the case, as against him at least, stood over to another time.

17 The fourth defendant was in a position where he had earlier applied for the separate decision of the questions in these proceedings as against him from the questions in the proceedings as against the third defendant. This application was heard by Barrett J and refused on 4 May 2007: see Australian Securities and Investments Commission v Sydney Investment House Equities Pty Ltd [2007] NSWSC 434. However, that application was made by counsel other than Mr Loxton. On this occasion Mr Loxton took the view that, in light of the developments as to Mr Goulding's mental health, it would be unfair for the proceedings to be heard against his client alone at this stage. 18 At least one of the reasons for this change of attitude was that, as these mental health questions had now arisen, whatever further evidence on this matter came forward on behalf of the third defendant, the fourth defendant was entitled to have a medical examination of the third defendant to investigate his mental condition, not only at the present time but at the time of the events which are agitated in the present proceedings, in case that mental condition could be taken as reflecting upon or detracting from the fourth defendant's responsibility for any actions he then engaged in. At this early stage this does not appear to me highly likely, but I accept the submission that, in light of what has happened, fairness requires that the fourth defendant be permitted to investigate this matter before being obliged to continue with the conduct of these proceedings.

19 The earlier refusal of separation by Barrett J was, of course, an interlocutory order and interlocutory orders may be revoked or their effect negatived by the Court upon fresh material being brought forward, so there is no difficulty in my coming to this conclusion. In those circumstances, it seemed to me as the matter progressed, and still seems to me today, that the fair course is to vacate the fixture commencing on 2 October 2007, and I propose to do so.

20 The question arises as to where the matter should go from here. The proceedings should obviously be dealt with as quickly as possible in the interests of all the parties and in the interests of the general public, bearing in mind the nature of the allegations made by the plaintiff in the proceedings.

21 The submission now put to me on behalf of the plaintiff is that I should take whatever steps are necessary to obtain the earliest possible hearing of the case. It is no use the matter returning to the Corporations Judge, since he is not authorised to give fixtures longer than three days. This matter was in effect fixed before me as a long case by the Chief Judge in Equity. Whilst I have not gone and enquired of all the Judges what time their Honours have available, I know that the lists of most Judges of this Division are taken up well into next year and, in the case of many, well beyond the 5 May date that I can give. The Court having been incommoded by the necessity to grant the present adjournment, there is advantage from the Court's point of view in the matter continuing before me as I have gathered some knowledge of the matter in the course of managing the proceedings leading up to the now aborted trial.

22 In those circumstances it seems to me that 5 May 2008, when the matter can be fixed for trial before me, will give a hearing date as early as any that may reasonably be anticipated. If it proves that Mr Goulding's mental condition is such that it requires stabilisation, it will give a reasonable period for the stabilisation of that condition. I therefore propose to re fix the matter for trial before me on that day.

23 The next question that arises is what additional orders ought be made in the meantime. Mr Gillard has indicated to me that he finds some difficulty in obtaining instructions for the giving of undertakings by his client to the Court. This appears to me to be a responsible attitude on his part and I have not in any way pressed him to do so. After discussion among the parties, I have taken the view that two injunctions ought be granted against the third defendant restraining him from acting as a director of Ocean Edge Resort Pty Ltd and Boston Sterling Pty Ltd, which are the only two companies of which he is at present a director, and restraining him from accepting other directorships.

24 Whilst Mr Gillard cannot consent to those injunctions on the third defendant's behalf, he does not object to those injunctions being granted, provided that at this stage they are granted only up to and including 26 October 2007, so that the plaintiff will be obliged to apply for their continuation at that time and bear the onus of establishing the need for a continuation of the injunctions. On that basis I propose to grant those injunctions up to and including that day. In particular Mr Gillard does not contest the Court's power to grant injunctions in those terms.

25 Mr McInerney has put on the plaintiff's behalf submissions about the Court's sources of power and the basis on which injunctive relief may be granted. He has felt obliged to draw my attention to the decision of White J in ASIC v Mapstone (2006) 59 ACSR 214 at [28] - [34] and the Court appreciates his frankness in so doing. However, the Court in my view has ample power under its general jurisdiction to grant the injunctions I propose to grant and, as I have said, there is no submission on the part of the third defendant that the Court does not have power to do so.

26 Mr McInerney has asked that those injunctions be granted specifically on the basis that there is a sufficient prima facie case of mental incapacity on the third defendant's part to act as a company director, coextensive with lack of capacity at the present time to conduct these proceedings. However, I am of the view that there is not a sufficient prima facie case of mental incapacity of Mr Goulding to act as a director to form the basis of injunctive relief against him on that basis.

27 I have already indicated that, in light of the current doubts as to Mr Goulding's mental condition, including aggression, confusion and lack of lucidity, if he does not take his medication, it is inappropriate for the Court to proceed with the hearing of the case until a better account of Mr Goulding's mental condition can be obtained. However, as I have said, this is a case in which serious allegations are made about the conduct of Mr Goulding as a director of companies and there is in existence a considerable body of evidence to support those allegations. Under those circumstances, although there has not been injunctive relief of this sort to date, on the basis that the matter is to be further adjourned upon Mr Goulding's application, I have taken the view that the public interest requires injunctive relief of the sort now granted. 28 There has been some debate about whether an undertaking as to damages can or should be required of the plaintiff in support of that injunctive relief. All that needs be said is that no undertaking as to damages has been asked for at the moment in light of the comparatively limited nature of the relief and the quite short period of time during which, as granted, it is to operate. 29 In view of the fourth defendant's application that the fixture be cancelled and the proceedings be adjourned as against him also, I have suggested that it would be appropriate for him to give to the Court undertakings concerning his activities as a director or other business activities in the meantime. Appropriate undertakings have been given to the Court on behalf of the fourth defendant. Those undertakings are given until further notice. 30 The other matters that I propose to deal with as against the third defendant are that he should be ordered to authorise and request Dr Sam Roberts to provide the Court, the plaintiff and the fourth defendant with a written report concerning the doctor's examination and diagnosis of the third defendant. I have been informed by Mr Gillard that there is some doubt that the third defendant will be able to or at least will provide the fee required by the third defendant necessary for Dr Roberts to provide such a report. In any event, I propose to make at once the orders sought by both the plaintiff and the fourth defendant for medical examination on their behalf of the third defendant. They should proceed swiftly to select their examiner or examiners and to arrange an appointment or appointments accordingly so that that material may be available as soon as possible. 31 I have also required the third defendant to serve on the plaintiff and the fourth defendant an affidavit setting out the present business activities of Ocean Edge Resort Pty Ltd and Boston Sterling Pty Ltd. An affidavit has been filed in Court today, but does not appear adequate, and I propose to make that order as requested. 32 As I think I have indicated, I am prepared to fix the matter to commence before me on 5 May 2008 to continue until 16 May and on 2 to 6 and 10 and 11 June 2008. I have fixed the matter for a greater time than the nine days that have been reserved on this occasion. I do not wish to encourage the parties to use more than nine sitting days and, despite my general cynicism about counsel's estimates of time, I cannot at the moment see that nine days would not be adequate. However, I have fixed extra time during which the case could continue as I do not want to run any risk of the hearing of the matter not concluding in the one future fixture. 33 Costs will be reserved. I should not like to determine this question of costs without a full adumbration of Mr Goulding's mental condition.

10/04/2008 - Typographical error - Paragraph(s) Plaintiff's counsel

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